Fierce competition for university places this summer looks certain as a late surge in older applicants seeking to escape the recession is revealed in figures published today.

"Snapshot" data from the University and College Admissions Service (Ucas) shows an extra 38,952 applicants for full-time undergraduate degrees at English universities – a rise of 8.8% – at a time when the government has announced a cutback in the number of extra places it will fund.

In January ministers restricted the number of extra students they can take on in the next academic year to 10,000 – representing a cut of 5,000 – which means at least 28,000 potential students could miss out on university places. Universities are expecting the number of late applicants to rise as the employment situation deteriorates and people seek qualifications to help them in the job market or sit out the credit crunch on campus.

Among 21- to 24-year-olds, numbers rose 14.7%, and those aged 25 and over rose 15.8%. This is compared with a rise in students aged less than 20 applying to English universities of 7.3%, suggesting an increase of applicants who have been in employment.

Vice-chancellors said they were encouraged by the unprecedented interest in higher education but warned of "fierce competition" for places. There are fears that universities will under-recruit rather than risk heavy financial penalties for overshooting their student quotas, as ministers have threatened.

The most popular courses are law, psychology, medicine, design studies and nursing. There was also a rise in overseas applicants of 12% to 67,114 – most from Ireland (5,425, up 13.5%) and China (4,965, up 10.7%).

Diana Warwick, chief executive of the umbrella group Universities UK, said: "We expect a challenging admissions period this summer due to the restriction on the number of undergraduate places that will be funded this year. This means that competition for places will be particularly fierce for those courses in high demand."

Pam Tatlow, chief executive of the Million+ university group, said: "These figures are the tip of the iceberg and there will be more applications to come.

"It would be unthinkable if thousands of students were unable to improve their chances of future employment by being deprived of the opportunity go to universities which have the capacity to teach them.

"The government will have to fund more places unless it wants to add to the unemployment queue or resile on its promise to improve higher level skills."

Wes Streeting, president of the National Union of Students, said he was "very concerned" and called for an immediate review of student numbers for the coming year and more investment now to prevent costly long-term unemployment later. "Unless there is an urgent expansion of places, universities will be unable to meet this demand," he said.

Sally Hunt, general secretary of the University and College Union, urged the government to reinstate funding for second chance students taking qualifications equal to or lower than the one they already hold that were cut by ministers in September 2007.

The higher education minister, David Lammy, said: "Far from freezing or capping student numbers, this government has presided over a huge increase in people going to university, with an extra 300,000 in the system since 1997.

"Student numbers have continued to rise, with 17,000 more full-time undergraduate students going to university last year and an estimated further 22,000 more in the current academic year 2008-09.

"This is backed by continuing record investment in HE at more than £7.5bn this year, an increase of 24% over the last decade, including a rise of 4% this year.

"Yesterday's budget changes none of this, but it is right that, as the nation tightens its belt in the face of real pressures on public spending, the HE sector plays its part in ensuring value for money for taxpayers by finding efficiency savings.

"We are targeting resources at frontline provision and will not make the mistakes of past recessions which is why we are doing everything we can offer real help to our young people through education, training and financial support."

David Willetts said: "There are 9% more applicants this year, yet few additional places.

"Ministers are paving the way for thousands of young people to be disappointed this summer, forcing them onto an appalling job market.

"Young people must not be the victims of this recession."

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